Kura Oncology, Inc. — Form 10-Q Summary
Reporting period: Three and nine months ended September 30, 2022. The interim financial statements are unaudited and prepared under U.S. GAAP. Kura is a clinical-stage biopharmaceutical company developing precision oncology medicines and has no approved products or product revenue.
Business Context and Pipeline
- Lead programs are ziftomenib, an oral menin-KMT2A inhibitor for genetically defined acute myeloid leukemia, and tipifarnib, a farnesyl transferase inhibitor being evaluated in biomarker-defined solid tumor and hematologic indications.
- KO-2806, a next-generation farnesyl transferase inhibitor, was in IND-enabling studies.
- KOMET-001 Phase 1b expansion enrollment for ziftomenib was completed in August 2022. Management expected to initiate the Phase 2 registration-directed portion in the first half of 2023, subject to FDA review.
- The KURRENT-HN trial of tipifarnib plus Novartis’s alpelisib was ongoing, and a Phase 1 trial of tipifarnib plus osimertinib in EGFR-mutated non-small cell lung cancer was expected to begin dosing in the fourth quarter of 2022.
Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Revenue | No product revenue | No product revenue |
| Research and development expense | $25.0 million, versus $22.4 million | $70.1 million, versus $63.8 million |
| General and administrative expense | $11.6 million, versus $11.3 million | $34.6 million, versus $34.5 million |
| Total operating expenses | $36.6 million, versus $33.7 million | $104.7 million, versus $98.2 million |
| Other income, net | $1.1 million, versus $0.3 million | $2.0 million, versus $0.5 million |
| Net loss | $35.5 million, versus $33.4 million | $102.7 million, versus $97.7 million |
| Net loss per share | $0.53, versus $0.50 | $1.54, versus $1.47 |
- Cash flow: Net cash used in operating activities was $83.5 million for the nine months ended September 30, 2022, compared with $81.2 million in the prior-year period. Investing activities provided $79.9 million, primarily from maturities of marketable securities, compared with $200.9 million of cash used in the prior-year period. Financing activities provided $3.9 million from equity-plan issuances.
- Liquidity: Cash, cash equivalents and short-term investments totaled $427.8 million at September 30, 2022, compared with $517.9 million at December 31, 2021. Cash, cash equivalents and restricted cash totaled $91.1 million at September 30, 2022.
- Investments: Short-term investments were $336.8 million and had $9.4 million of unrealized losses, primarily attributed to interest-rate changes rather than credit deterioration. Management reported no allowance for credit losses.
- Debt: No debt was outstanding at September 30, 2022. On November 2, 2022, after quarter-end, Kura borrowed $10.0 million under a term-loan facility providing for up to $125.0 million, subject to conditions and approvals.
- Margins: Gross margin and operating margin are not meaningful because the company has no product revenue. Net loss as a percentage of revenue is likewise not meaningful.
Material Changes Versus Prior Comparable Period
- Nine-month research and development expense increased $6.4 million, driven by higher ziftomenib costs, discovery-stage work including KO-2806, personnel and other support costs, and share-based compensation. These increases were partly offset by lower tipifarnib-related costs.
- Nine-month general and administrative expense was essentially stable, increasing $0.1 million.
- Nine-month net loss increased $5.0 million, while operating cash burn increased $2.3 million.
- Interest income increased as marketable securities generated higher returns, and interest expense declined following repayment of the prior term loan in May 2021.
- Accumulated other comprehensive loss increased to $9.4 million from $1.8 million, reflecting unrealized losses on marketable securities and foreign currency.
- Shares outstanding increased to 66.9 million at September 30, 2022 from 66.6 million at December 31, 2021, primarily from equity-plan activity.
Guidance, Outlook, Risks and Unusual Items
- Management stated that existing cash, cash equivalents and short-term investments, together with the term-loan facility if fully drawn, were expected to fund operating expenses into 2026 under current plans. The company nevertheless expects to require substantial additional financing.
- The February 2022 ATM facility permits sales of up to $150.0 million of common stock; no shares had been sold under the facility as of the filing.
- After quarter-end, Kura entered into a securities purchase agreement under which Bristol-Myers Squibb agreed to purchase 1,370,171 shares for approximately $25.0 million of gross proceeds. The offering was expected to close around November 3, 2022.
- The post-quarter-end term loan bears interest at the greater of 8.65% or a formula based on the prime rate, matures in November 2027, is secured by substantially all assets other than intellectual property, and includes restrictive covenants, fees and warrants.
- KOMET-001 previously experienced an FDA partial clinical hold after a Grade 5 serious adverse event potentially associated with differentiation syndrome. The hold was lifted in January 2022 after agreement on a mitigation strategy.
- Key risks include clinical-trial failure or delay, serious adverse events, regulatory uncertainty, patient enrollment and biomarker-screening challenges, dependence on third-party manufacturers and CROs, COVID-19-related disruptions, companion-diagnostic development, intellectual-property limitations, additional capital needs and potential dilution.
- The company reported no material legal proceedings. Management concluded that disclosure controls and procedures were effective as of September 30, 2022. An ERP implementation during the quarter changed certain accounting and business processes but was not reported to have materially affected internal control over financial reporting.
Important Facts for Investors to Verify
- Clinical efficacy, safety and dose-selection data for ziftomenib from the completed KOMET-001 Phase 1b cohorts and the planned Phase 2 program.
- Whether ziftomenib or tipifarnib can obtain regulatory approval, including the need for approved companion diagnostics.
- Actual cash burn, investment maturities and the duration of the cash runway, including the impact of the post-quarter-end debt facility and equity financing.
- Terms, borrowing conditions, collateral, covenants, interest costs and warrants associated with the Hercules term-loan facility.
- Completion and proceeds of the Bristol-Myers Squibb registered direct offering.
- Potential dilution from the ATM facility, equity plans, outstanding options, restricted stock units and warrants.
- Effects of the prior ziftomenib clinical hold, differentiation syndrome risk and any subsequent safety signals.